Appraisers' Free Forum

Flawed poll. Freddie and Fannie aren't in there.

Fannie and Freddie aren't Banks.

Otis wrote:Fannie and Freddie aren't Banks.

Of course I know that... I just kind of skipped it for the humor aspect (just cll me Skippie).

It's probably true that Fannie and Freddie cannot fail in the traditional sense of bank falilure. However, soem of the stuff I've been reading sounds like the Feds would take a similar kind of role if there was a bailout. It's hard to know at this point whether that will happen or not. Some of the government... specifically, OFHEO say that the GSE's are well-capitalized and that no bailout will be needed. Others say that their failure is just around the corner. Only thing for sure is that someone is lying.

http://www.kansascity.com/431/story/701038.html

I think the feds (all branches & agencies) will focus on saving the GSEs as their primary strategy to help all the other banks. Outside of the discount window and quelling "rumor mongers" I think the feds will leave the other banks to their own resources.

The GSEs affect the health of all banks. Keep them open and keep the discount window open and at least some of the banks will survive to pick up the rubble.

I think the feds' strategy has been reduced to that and expect many banks to fail, including big ones. It's anyone's guess who that might be seeing INDY wasn't even on anyone's short list. But I voted for Nat'l City.

Personally, I think that half that list will go.

I've been trying to tell people this for years:

http://www.nytimes.com/2008/07/14/washi ... ?th&emc=th

While senior Democratic and Republican officials in successive administrations have for many years repeatedly denied that the trillions of dollars of debt Fannie and Freddie issued is guaranteed, the package, if adopted, would bring the Treasury closer than ever to exposing taxpayers to potentially huge new liabilities.

The taxpayers will be on the hook again.

http://www.nytimes.com/2008/07/14/washi ... ?th&emc=th

In short, in a nation that holds itself up as a citadel of free enterprise, the government has transformed from a reliable guarantor into effectively the only lender for millions of Americans engaged in the largest transactions of their lives.

http://www.washingtonpost.com/wp-dyn/co ... 02020&pos=

I only hear one lonely voice in the wilderness:

"Someday this capitalistic economy, or what we used to call the capitalistic system, needs to get back on track and that means failure," said Lee Hoskins, former president of the Federal Reserve Bank of Cleveland. "You can't have risk-taking without failure."

...and, isn't it fitting? He's a "former" president....

From the mid-1980s to mid-1990s, the U.S. government seized more than 1,000 thrift institutions and sold off more than $500 billion in assets at a taxpayer loss of $124 billion. The size of those assets would be equal to approximately $830 billion today and the taxpayer loss about $165 billion.

$165B / 304M - do the math to find the part of this you must pay. When are the taxpayers going to wake up and smell the coffee? There's really no telling, but I'm betting that when it happens it will be ugly.

So who’s next? Two interesting takes on that.

Thornberg says, “We’re still early in this cycle.” He says regional banks don’t suffer the bulk of their problems until late in a credit downturn. We can expect to see home loan delinquencies to continue to spread to personal loans, car loans and student loans. He also says the next big shoe to drop is regional banks with a lot of exposure to builders, including commercial builders who are building condos or other projects that will fail. Thornberg says banks often hold onto part of the loans they give builders, in essence paying themselves and keeping the loans current. “The books aren’t even reflecting the potential problems in those loans.” But when I asked which banks in particular, he said he doesn’t want to name names. I suggested he was afraid of being the next Chuck Schumer, after regulators blamed the New York Senator for causing the run on IndyMac. “A lot of people are blaming Chuck Schumer,” Thornberg says. “All Chuck did was point out what investors should’ve known all along. IndyMac was in big, big trouble.”

Richard Bove at Ladenburg Thalmann has a different take on who may be next. In a report, he looks at all the FDIC-backed institutions, comparing each bank’s bad loans to its overall assets through two ratios. First, he divides the “non-performing assets” of an institution--bad loans, late loans, foreclosed assets--by all of its outstanding loans. “A radio above 5 percent suggests danger.” The overall industry ratio is below 2 percent. That’s good news. But it’s not so good for individual names like Downey Financial, with a 13.86 percent ratio (on Sunday, Downey Financial reported its non-performing assets were over 14 percent, up from 1 percent a year ago). Other names in the “danger zone” are Corus Bankshares at 13.18 percent, Doral Financial at 12.82 percent, FirstFed Financial at 6.73 percent, Oriental Financial at 6.12 percent, and BankUnited Financial at 5.36 percent.

Then Bove ran a second set of numbers dividing a bank’s non-performing assets by its reserves plus common equity. “A ratio about 40 percent is the danger zone.” This is where it gets interesting. You have all the same names as listed before, PLUS WASHINGTON MUTUAL WASHINGTON, which comes in with a ratio at 40.6 percent. Bove calls this being “on the edge” of danger but not quite there yet.

Bove blames regulators for not doing much of anything to prevent us from getting to this point. “Regulators should have the courage to stand in front of a mania and stop it,” he says. “This requires a courage that simply is not in evidence in Washington either on the positive or negative side.” He’s concerned about what happens next. “All of the actions are to deepen the trend. It really is beyond inexcusable for top policymakers to argue that large financial institutions should be allowed to fail. It is, of course, just as inexcusable to look the other way while excesses are driven through the system.”

http://www.cnbc.com/id/25664376

Interesting article, Michael. Thanks for posting it. I've wondered if WAMU wasn't in some trouble for quite some time now... but, my musings were based on much less scientific evidence.

Here you go Terrel - right where I voted the other day.

http://appraisers.freeforums.org/fannie ... html#26155

My vote is B of A as any place stupid enough to by CW.......................

The statements above are my personal opinions and are not offered as fact. They reflect my perceptions of, and/or about, the above indicated topic(s), person(s), company(s), and/or entity(s) based upon my experience(s) and/or dealing(s) with them. Given they are opinions based upon personal observation; the above statements are protected speech, as guaranteed by the First Amendment to the Constitution of the United States of America.

Otis wrote:Here you go Terrel - right where I voted the other day.

http://appraisers.freeforums.org/fannie ... html#26155

The bank holds a substantial $170 billion residential mortgage portfolio; a whopping $121 billion of that total was in the form of option ARMs at the end of Q1. It said last week that it expects to report an after-tax loss of between $2.6 and $2.8 billion, or $1.23 to $1.33 per share, as it absorbs $4.2 billion to build its loan loss reserves.

I gotta borrow the tag line: What were they smoking?

Oops. Loke like I was wrong... it's Citi:

http://news.yahoo.com/s/nm/20080718/bs_ ... results_dc

But, noooo, wait a minute...

http://news.yahoo.com/s/ap/20080718/ap_ ... all_street

That was the good news!